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Appendix A

RULE 23 OF THE FEDERAL RULESOF CIVIL PROCEDURE

RULE 23. CLASS ACTIONS(a) Prerequisites to a Class Action.

One or more members of a class may sue or be sued as representative parties onbehalf of all only if (1) the class is so numerous that joinder of all members isimpracticable, (2) there are questions of law or fact common to the class, (3) theclaims or defenses of the representative parties are typical of the claims or de-fenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable.

An action may be maintained as a class action if the prerequisites of subdivision(a) are satisfied, and in addition:(1)the prosecution of separate actions by or against individual members of theclass would create a risk of (A)inconsistent or varying adjudications with respect to individual mem-bers of the class which would establish incompatible standards of con-duct for the party opposing the class, or(B)adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the othermembers not parties to the adjudications or substantially impair or im-pede their ability to protect their interests; or(2)the party opposing the class has acted or refused to act on grounds gener-ally applicable to the class, thereby making appropriate final injunctive re-lief or corresponding declaratory relief with respect to the class as a whole;or

508Class Action Dilemmas

(3)the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual mem-bers, and that a class action is superior to other available methods for thefair and efficient adjudication of the controversy. The matters pertinent tothe findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extentand nature of any litigation concerning the controversy already com-menced by or against members of the class; (C) the desirability or undesir-ability of concentrating the litigation of the claims in the particular forum;(D) the difficulties likely to be encountered in the management of a classaction.

(c) Determination by Order Whether Class Action to Be Maintained;Notice; Judgment; Actions Conducted Partially as Class Actions.

(1)As soon as practicable after the commencement of an action brought as aclass action, the court shall determine by order whether it is to be so main-tained. An order under this subdivision may be conditional, and may be al-tered or amended before the decision on the merits.(2)In any class action maintained under subdivision (b)(3), the court shalldirect to the members of the class the best notice practicable under the cir-cumstances, including individual notice to all members who can be identi-fied through reasonable effort. The notice shall advise each member that(A) the court will exclude the member from the class if the member so re-quests by a specified date; (B) the judgment, whether favorable or not, willinclude all members who do not request exclusion; and (C) any member who does not request exclusion may, if the member desires, enter an ap-pearance through counsel.(3)The judgment in an action maintained as a class action under subdivision(b)(1) or (b)(2), whether or not favorable to the class, shall include and de-scribe those whom the court finds to be members of the class. The judg-ment in an action maintained as a class action under subdivision (b)(3), whether or not favorable to the class, shall include and specify or describethose to whom the notice provided in subdivision (c)(2) was directed, and who have not requested exclusion, and whom the court finds to be mem-bers of the class.(4)When appropriate (A) an action may be brought or maintained as a classaction with respect to particular issues, or (B) a class may be divided intosubclasses and each subclass treated as a class, and the provisions of thisrule shall then be construed and applied accordingly.

Rule 23 of the Federal Rules of Civil Procedure509

(d) Orders in Conduct of Actions.

In the conduct of actions to which this rule applies, the court may make appro-priate orders: (1) determining the course of proceedings or prescribing mea-sures to prevent undue repetition or complication in the presentation of evi-dence or argument; (2) requiring, for the protection of the members of the classor otherwise for the fair conduct of the action, that notice be given in suchmanner as the court may direct to some or all of the members of any step in theaction, or of the proposed extent of the judgment, or of the opportunity of members to signify whether they consider the representation fair and adequate,to intervene and present claims or defenses, or otherwise to come into the ac-tion; (3) imposing conditions on the representative parties or on intervenors; (4)requiring that the pleadings be amended to eliminate therefrom allegations asto representation of absent persons, and that the action proceed accordingly;(5) dealing with similar procedural matters. The orders may be combined withan order under Rule 16, and may be altered or amended as may be desirablefrom time to time.

(e) Dismissal or Compromise.

A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given toall members of the class in such manner as the court directs.

(f) Appeals.

A court of appeals may in its discretion permit an appeal from an order of adistrict court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal doesnot stay proceedings in the district court unless the district judge or the court of appeals so orders.

RULE 23.1. DERIVATIVE ACTIONS BY SHAREHOLDERS

In a derivative action brought by one or more shareholders or members to en-force a right of a corporation or of an unincorporated association, the corpora-tion or association having failed to enforce a right which may properly be as-serted by it, the complaint shall be verified and shall allege (1) that the plaintiff was a shareholder or member at the time of the transaction of which the plain-tiff complains or that the plaintiff's share or membership thereafter devolved onthe plaintiff by operation of law, and (2) that the action is not a collusive one toconfer jurisdiction on a court of the United States which it would not otherwise

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